Fuel Tax Cut Expansion Next Month... 20% Immediate Reflection at Gas Stations Nationwide

Oil Price Stabilization Reversal Card Drawn
Refiners' Burden Expected to Reach Hundreds of Billions

Due to Russia's invasion of Ukraine, international oil prices have surged sharply, causing domestic fuel prices to continue soaring day after day. On the 23rd, gasoline and diesel were being sold at a Seoul gas station for well over 2,000 won per liter. Photo by Moon Honam munonam@

[Asia Economy Reporter Oh Hyung-gil] Starting next month, fuel prices at about 2,000 nationwide budget gas stations and oil company-operated gas stations are expected to drop by approximately 80 won from current levels. The government has extended the fuel tax reduction, which was scheduled to end this month, by three months and increased the reduction rate from the current 20% to 30%, raising expectations that the soaring domestic fuel prices will stabilize for the time being.

On the 5th, the oil industry is discussing plans to lower fuel prices at company-operated gas stations starting in May, in line with the government's new fuel tax reduction policy. An industry official said, "To alleviate consumer burdens caused by high oil prices, we are coordinating with relevant departments to immediately lower fuel prices at company-operated gas stations in accordance with the government's implementation schedule."

Among the approximately 12,000 gas stations nationwide, budget gas stations account for 11-12%. Company-operated gas stations are estimated to make up 7-8%, so about 20% of all gas stations nationwide are expected to immediately reflect the effects of the fuel tax reduction.

Oil companies also immediately lowered fuel prices at company-operated gas stations during previous fuel tax reductions in 2018 and November last year, reflecting the reduction effects in market conditions. Although it usually takes about two weeks to supply products from oil refineries to gas stations, the price cuts were implemented promptly as a cooperative measure with government policy.

However, the burden on oil companies due to this is expected to reach several hundred billion won. SK Innovation disclosed in its Q4 earnings report last year that it incurred costs of 80 billion won related to the fuel tax reduction in its petroleum business.

If the fuel tax reduction is fully reflected in prices, fuel prices are estimated to drop by 82 won more than currently. With a 30% fuel tax cut, the tax on gasoline per liter will decrease to 574 won. This is 246 won (42%) lower than before the fuel tax reduction and 82 won (28%) lower than the amount under the previous 20% reduction rate of 164 won.

For a driver who drives 20 km daily for a month with a fuel efficiency of 10 km per liter, it is predicted that they could save about 5,000 won on fuel costs compared to the existing 20% fuel tax reduction for gasoline.

Meanwhile, according to the oil price information site OPINET, the nationwide average gasoline price on this day was 1,992 won per liter, down 21 won from the previous record high of 2,003 won on the 16th of last month. Diesel was 1,912 won, 8 won lower than the previous record high of 1,920 won (March 30).

This content was produced with the assistance of AI translation services.